Higher first-quarter dividend

Air Products and Chemicals (APD) has declared its regular quarterly cash dividend for the first quarter. To be eligible for the dividend, investors should hold Air Products and Chemicals shares as of the close of business on April 1. The company is expected to pay the dividend on May 13.

Air Products and Chemicals Increased the Q1 Dividend

Air Products and Chemicals has declared a dividend of $1.16 per share, which represents an increase of ~5.5% on a YoY (year-over-year) basis compared to the previous quarter. Linde (LIN), Celanese (CE), and Eastman Chemical (EMN) paid their latest quarterly dividends of $0.875, $0.54, and $0.62, respectively. Air Products and Chemicals’ dividend has grown at a compound annual growth rate of ~8.5% since 2014.

At the end of the first quarter, the number of outstanding Air Products and Chemicals shares stood at 221.0 million. Assuming that the company doesn’t buy back any shares until the record date, then it will be spending $256.36 in the form of dividends.

Free cash flows

Can Air Products and Chemicals’ free cash flows support its current and future dividend policy?

Air Products and Chemicals has been generating positive free cash flows. In the past five years, Air Products and Chemicals has been generating an average free cash flow that’s slightly above $1 billion. Since dividends are usually paid out of free cash flows, most of the company’s free cash flows are used to pay dividends. Since 2014, ~82% of the free cash flows have been used to pay dividends. As a result, Air Products and Chemical doesn’t have much cash for other financing activities.

Investors could hold Air Products and Chemicals indirectly by investing in the Materials Select Sector SPDR ETF (XLB). XLB has invested 6.8% of its portfolio in Air Products and Chemicals as of March 28.

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